Security Systems News - Blackstonehttp://securitysystemsnews.com/taxonomy/term/5041
enNortek to buy 2GIG for $135mhttp://securitysystemsnews.com/article/nortek-buy-2gig-135m
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<div class="field-item even">Deal includes five-year supply agreement with Vivint</div>
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<div class="field-item even" property="schema:datePublished dc:date"><span class="date-display-single" property="schema:datePublished dc:date" datatype="xsd:dateTime" content="2013-02-14T00:00:00-05:00">02/14/2013</span></div>
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<div class="field-item even" rel="schema:author dc:creator">Martha Entwistle</div>
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<div class="field-item even" property="schema:articleBody content:encoded"> <p>PROVIDENCE, R.I.—Nortek, parent company of Linear, announced this morning that it will acquire 2GIG Technologies for $135 million.</p>
<p>2GIG, known for its Go!Control system, is a manufacturer of security and home automation equipment. <a href="http://www.securitysystemsnews.com/article/honewell-vets-form-2gig-technologies">The company was launched in 2009 by two former Honeywell employees.</a></p>
<p>Nortek’s Linear business helped develop the 2GIG Go!Control product. Linear was in the news a couple of weeks ago when <a href="http://www.securitysystemsnews.com/article/linear-offer-z-wave-product-line">it purchased a line of Z-Wave-enabled products.</a></p>
<p>“Our partnership with 2GIG goes back about five years. We worked with 2GIG on developing the original panel as well as the systems that have evolved around that panel,” Mike O’Neal, president of Linear, told <em>Security Systems News.</em> “We have a very tight working relationship.”</p>
<p>O’Neal is excited about now being able to bring 2GIG products “to a whole range of new dealers and distributors.”</p>
<p>Vivint was 2GIG’s largest customer and will now become Linear’s largest customer, and Linear is looking forward to “continuing to work with [Vivint] as they move through and innovate around the security industry moving forward,” O’Neal said. The deal includes a five-year supply agreement with Vivint.</p>
<p>He said Linear’s purchase of a Z-Wave line is indicative of how it is looking at “other possibilities and finding products that complement what we view as the future of the security industry.”</p>
<p>Will that mean more acquisitions? Perhaps. “We may buy, license, build or develop [new offerings], but you’ll see a lot coming from us in the next 18 to 24 months,” he said.</p>
<p>“This is an absolute perfect fit for 2GIG,” Lance Dean, 2GIG co-founder told SSN in an email interview. “We’ve known Nortek/Linear from the very beginning. They’ve been an instrumental part of our success.”</p>
<p>“This will allow us to become a major player in the space for years to come. Nortek/Linear brings tremendous resources and capabilities … they’re a manufacturing organization and they have a tremendous suite of products. There are so many synergies between the two groups,” Dean said.</p>
<p>2GIG is currently owned by Blackstone. <a href="http://www.securitysystemsnews.com/article/blackstone-closes-vivint-purchase">Blackstone acquired 2GIG in December, the same time it acquired Vivint.</a></p>
<p>While 2GIG was never owned by Vivint, the two companies have had a long association. They shared some of the same investors before the Blackstone acquisition: Goldman Sachs, Jupiter Partners, Peterson Partners and Vivint CEO Todd Pedersen.</p>
<p>Vivint is also the largest single customer for 2GIG’s products, although in 2012, 2GIG derived more revenue from its 2,000 other dealers than from Vivint. The company sold more than 300,000 systems, with about 160,000 to customers other than Vivint, according to Todd Santiago, president of 2GIG.</p>
<p>Duane Paulson, Linear SVP, product and market development, said Linear’s philosophy is to “connect and be in control” of the three product pillars: security, access control and integrated systems, and health and wellness. Linear is a major provider of PERS products.</p>
<p>“All of the products [now and in the future] will link into the residential security control system, the commercial access control system or what evolves out of our PERS business,” Paulson said. </p>
<p>The entire 2GIG team, including Lance Dean, will join Linear. The exception is Santiago who will join Vivint in the newly created position of chief sales officer. He will begin transitioning to Vivint during the next few weeks.</p>
<p>“I’ll assume responsibility for existing and future sales verticals at Vivint,” Santiago said. “We have our sights set on additional sales verticals, including commercial and international expansion.”</p>
<p>Lance Dean said: "Todd has been a huge part of why 2GIG has been so successful ... It has been great having him as my partner these past four years. He has a great opportunity and I know he'll do a great job in his next role and we will miss him."</p>
<p>The Nortek acquisition of 2GIG will be financed with a combination of cash on hand and Nortek’s credit facility. It is subject to regulatory approval. Executives expect the deal to close in the next 30 days.</p>
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<span property="dc:title" content="Nortek to buy 2GIG for $135m" class="rdf-meta element-hidden"></span>Thu, 14 Feb 2013 15:00:13 +0000SSN Editor16120 at http://securitysystemsnews.comhttp://securitysystemsnews.com/article/nortek-buy-2gig-135m#commentsFollowing the money: Schmidt, Barnes and Christhilf talk deals, valuations and taxes http://securitysystemsnews.com/article/following-money-schmidt-barnes-and-christhilf-talk-deals-valuations-and-taxes
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<div class="field-item even">Experts reflect on 2012, share predictions for 2013 </div>
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<div class="field-item even" property="schema:datePublished dc:date"><span class="date-display-single" property="schema:datePublished dc:date" datatype="xsd:dateTime" content="2012-12-12T00:00:00-05:00">12/12/2012</span></div>
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<div class="field-item even" rel="schema:author dc:creator">Martha Entwistle</div>
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<div class="field-item even" property="schema:articleBody content:encoded"> <p>YARMOUTH, Maine—A number of big deals happened in 2012: the split-up of Tyco, the acquisition of Vivint and the creation of Securadyne, to name a few. As the end of the year approached, Security Systems News conducted a virtual roundtable with industry experts about the deals that went down and those that did not. How did valuations compare to 2011, and were buyers’ and sellers’ expectations matching up?</p>
<p>Weighing in on these topics were Will Schmidt, managing director of CapitalSource; Michael Barnes, a partner in the consulting and advisory firm Barnes Associates, which specializes in the security alarm industry and co-sponsors the annual Barnes Buchanan Conference; and Stuart M. Christhilf, principal at Pamlico Capital.</p>
<p><strong>SSN:</strong>What was the most interesting deal of 2012? Why?</p>
<p><strong>Schmidt:</strong>Vivint being <a href="http://www.securitysystemsnews.com/article/vivint-be-sold-blackstone-2-billion-deal">acquired by Blackstone</a> was the most interesting deal of the year because it demonstrated again that there continues to be a strong appetite from the private equity community for security alarm companies. Furthermore, this transaction continues to raise the bar on the size of companies that private equity targets within the industry and the amount of capital they are willing to invest.</p>
<p><strong>Barnes:</strong>I think the most interesting deal in 2012 is the <a href="http://www.securitysystemsnews.com/blog/adt-independence-today-s-day">spinout of ADT’s residential and small-business unit from Tyco</a>. First, it takes ADT out from under a conglomerate and offers investors a pure-play investment with the 800-pound gorilla of the industry. Second, it detached ADT residential from its large commercial operations, which remained with Tyco. This runs contrary to conventional wisdom, which has historically asserted large operating synergies associated with the combination. The thought is that the new ADT will be a leaner, more focused player. Lastly, it changes a critical reference point within the industry. Now the largest player is clearly a residential-market-oriented company, rather than just a subset of the entire industry. Combine this with the recent recapitalizations of Vivint and Monitronics, both of whom are similarly focused, plus the <a href="http://www.securitysystemsnews.com/article/att-enters-security-market-can-it-become-billion-dollar-business">entry of several very large MSOs</a> and cable companies, and things look very interesting in the residential-market side of the industry.</p>
<p><strong>Christhilf:</strong>There were a number of interesting deals in 2012, including bigger headline-grabbing deals on the residential alarm side, such as Blackstone’s purchase of Vivint, and buyouts of smaller, growing interactive service providers, such as <a href="http://www.securitysystemsnews.com/article/dtt-surveillance-recapitalizes">BV’s purchase of DTT</a> or TCV’s purchase of Alarm.com. You are seeing significant focus on providers of innovative new security/building automation services that are improving the return on investment and value proposition to the end customer right now. For us, given our focus on the <a href="http://www.securitysystemsnews.com/article/former-siemens-ge-execs-found-securadyne-acquire-securenet-platform-growth">systems integration space with Securadyne</a>, we thought <a href="http://www.securitysystemsnews.com/article/krg-capital-invests-convergint-technologies">KRG’s recent purchase of Convergint</a> was extremely interesting. It demonstrated a strong interest on the part of the financial community, in the form of both private equity firms and lenders, [and] in platform-grade commercial systems integration. M&amp;A in this end of the market has been dominated by strategics over the past number of years, and you really haven’t seen a systems integration deal of this scale that was so widely pursued by financial players in some time. </p>
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<p><strong>SSN:</strong> Can you make some generalizations about valuations this year for alarm companies and systems integration companies? Up or down from 2011?</p>
<p><strong>Schmidt:</strong>Valuations continue to remain strong. Based upon the transactions we have participated in during the year, it appears that there has been a modest upward trend in prices for the best-performing account bases in 2012. The market does remain disciplined, so sellers cannot assume that they will automatically realize the same sale multiples. The market is generally efficient, with the top-performing businesses being rewarded with the highest valuation multiples.</p>
<p><strong>Barnes:</strong>Generally, market values for alarm companies strengthened in 2012. We are right in the middle of finishing up our surveying and analysis for our <a href="http://www.barnesbuchanan.com/">upcoming conference in February</a>, so the full extent of the firming in values is not exactly clear. While overall averages will be up, we are seeing a widening spread between the highs and the lows. That is, the market is getting increasingly efficient, with a strong bias toward companies that have [achieved] and can achieve systematic growth above the overall industry rate.</p>
<p><strong>Christhilf:</strong>It is always hard to make generalizations about valuation trends, as data is incomplete and different segments of the market can be trending differently. But overall, our experience in the middle market would suggest that alarm monitoring valuations driven by RMR, EBITDA and SSCF multiples remained elevated at roughly the same levels in 2012 as they were in 2011, and that systems integration multiples of EBITDA were also relatively stable year over year. Despite macro pressures and other headwinds, valuation levels (as well as lending levels) have been strong, as the security sector can be somewhat recession-resistant and is benefiting from favorable trends around local and national security concerns, advancing technology, increased service offerings to market, [and] growing regulatory-driven demand.</p>
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<p><strong>SSN:</strong>A lot of deals happened in 2012, but several quality companies were "shopped around" but not acquired. How would you characterize expectations for valuations among systems integration company owners and alarm company owners? Are the expectations generally in line with what buyers/lenders are willing to pay?</p>
<p><strong>Schmidt:</strong>While there is talk of a couple of companies being “shopped around” and not trading, we see this as indicative of the strength and stability of the operating platforms and not necessarily a large bid-ask spread. Most disciplined sellers evaluate any sale offer against the risk and return of continuing to own and operate the business. Given the strong and stable operating performance, friendly capital markets and limited attractive alternatives to redeploy capital, in some cases continuing to own and operate the business was more attractive than selling.</p>
<p><strong>Barnes:</strong>A number of companies looked for buyers in 2012 but did not consummate a deal. This is not unusual in a strong, changing market with overall high average valuations. Every day that a business owner doesn’t sell at the market price, he (or she) is effectively buying the company at that price. With rising valuations and a potentially changing future, the hold/sell gap has narrowed and more owners are contemplating a sale. But, as I mentioned earlier, the market is more choosy and it often takes a sale process to define the value and allow the owner specific clarity on the issue. Sometimes, the value ends up below expectations and the company will not trade.</p>
<p><strong>Christhilf:</strong>There were certainly a few notable deals in 2012 that suffered from sellers’ expectations exceeding those of buyers’, and we currently view valuations as relatively high across our sectors of focus, although that is not necessarily a new phenomenon. When selling a business, you often see sellers attempt to get value for growing pipeline activity, expectations of reducing attrition, investments made previously in sales efforts, or various other adjustments or future activities that are not being fully reflected in the current financials and that can create significant differences of opinion on what is “fair value” for that business. Particularly in the uncertain times we lived through in 2012 and will continue to live in during 2013, it can be hard for buyers, who will often view those future value-drivers with greater skepticism, to pay sellers their view of “full value” today. And sellers that are invested in quality assets that are performing in this space today often have the luxury of waiting until they execute and grow into their targeted valuation in the future.</p>
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<p><strong>SSN:</strong>There was a lot of talk in 2012 about the potential benefits of getting deals done before Jan. 1, 2013 because of possible tax increases. What's going to bring sellers and buyers to the table in the new year?</p>
<p><strong>Schmidt:</strong>While the tax changes have certainly created a sense of urgency in the second half of 2012, we believe that tax strategy is only a small factor in the overall decision that drives a transaction. Despite 2013 being unlikely to benefit from tax-motivated selling, we believe that there will be a carry-over of transactions that did not get completed in late 2012 that will still occur in early 2013. Furthermore, the consolidation economics of the industry remain intact and there is no reason to expect that the market won’t revert back to the normal measured pace of strategic acquisition. Also, technology continues to make a big impact on the residential and commercial markets, so we would expect to see strategic fill-in acquisitions as industry participants look to round out their product sets. </p>
<p><strong>Barnes:</strong>The prospect of change will be the primary catalyst that will bring buyers and sellers together in 2013. New business models, applications, technologies and competitors are a given. What now also appears to be a given is higher tax rates. Ultimately, it is the net after-tax yield that is important to business owners in the hold/sell analysis discussed previously, so the prospect of an abrupt change downward in net realizable value can create a strong incentive, particularly for those who were likely to seek to sell in the near term anyway. Sadly, I think we are in for a number of future years where rates will likely go up and create specific short-term incentives and distortions in the market. Interestingly, the security alarm industry is particularly sensitive to changes in tax rates. A combination of operating dynamic and accounting treatment typically results in very little of the value created by most alarm companies being taxed in the period in which it was created. … All of this untaxed value, however, comes to light in a sale event, which makes owners very sensitive to the prevailing rates at the time of the transaction.</p>
<p><strong>Christhilf:</strong>While tax concerns clearly drove increased M&amp;A activity in 2012 like they did in 2010, we saw a lot of middle-market deals also driven by other factors: Sellers who had been sidelined for two to three years in the recession looking to gain liquidity; new security technologies and technology-enabled services that had been early-stage and often unprofitable starting to show greater promise; and both strategic and financial buyers leveraging their strong cash balances and receptive financing partners to support targeted M&amp;A strategies. We see these specific drivers, as well as the higher-level trends of an increasing focus on security concerns locally and nationally and the growing convergence of logical and physical security, continuing to support deal activity in 2013. So, if you assume that the world doesn’t spin off of its axis due to the fiscal cliff, European debt crises, geo-political issues or other calamities, and that we have a slow, plodding recovery, I think you will see sellers looking to monetize their investments at continued favorable valuations and interested buyers looking to play in what continues to be an attractive sector.</p> </div>
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<span property="dc:title" content="Following the money: Schmidt, Barnes and Christhilf talk deals, valuations and taxes " class="rdf-meta element-hidden"></span>Wed, 12 Dec 2012 18:06:40 +0000Leif Kothe15918 at http://securitysystemsnews.comhttp://securitysystemsnews.com/article/following-money-schmidt-barnes-and-christhilf-talk-deals-valuations-and-taxes#commentsVivint to be sold to Blackstone in $2 billion dealhttp://securitysystemsnews.com/article/vivint-be-sold-blackstone-2-billion-deal
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<div class="field-item even">CEO Pedersen: Vivint has plans to become one of the largest national players in commercial security</div>
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<div class="field-item even" property="schema:datePublished dc:date"><span class="date-display-single" property="schema:datePublished dc:date" datatype="xsd:dateTime" content="2012-09-18T00:00:00-04:00">09/18/2012</span></div>
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<div class="field-item even" rel="schema:author dc:creator">Martha Entwistle</div>
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<div class="field-item even" property="schema:articleBody content:encoded"> <p>PROVO, Utah—Vivint has entered into an agreement with the Blackstone Group to be acquired in a deal worth “north of $2 billion,” Todd Pedersen, Vivint CEO, told <em>Security Systems News.</em></p>
<p>“We’re pretty happy about it,” he said.</p>
<p>The deal, <a href="http://www.securitysystemsnews.com/article/vivint-exploring-sale">which <em>Security Systems News</em> did some initial reporting on last week,</a> is expected to close before the end of the year.</p>
<p>Blackstone will buy out Vivint’s current equity partners Goldman Sachs, Jupiter Partners and Peterson Partners. Vivint management, which previously controlled 50 percent, also “sold some equity,” so Blackstone is now the majority owner of the company, Pedersen said.</p>
<p>Now that it's the majority owner, how will Blackstone, which manages more than $190 billion in assets, change things internally at Vivint?</p>
<p>It won’t, Pedersen said.<br /> <br />The Blackstones of the world don’t want to run the companies they invest in, he said. “They want to invest in well-run companies that are growing and have a huge upside promise,” Pedersen said. “This means more opportunities for our employees. This is going to super-charge Vivint’s ability to go to market with new services.”</p>
<p>“They’re committed to giving us the resources to really brand the company, not as a security company, but as a home technology service company,” he said.</p>
<p>Pedersen said the plan is to “continue to focus on more technology, to launch new services and to grow market share substantially.”<br /> <br />Among the new services Vivint is contemplating offering is “basic in-home health care,” Pedersen said. That service will include a PERS-style component, but he envisions a “much broader, deeper, richer service. It’ll be a range of services.”</p>
<p>Vivint also plans to go international. It will launch all of its current services, with the exception of its solar offerings, in Australia as early as this fall.</p>
<p>Commercial security is also part of the plan “at some point next year,” Pedersen said. Furthermore, he believes the company has the ability to become one “of the largest national players in the commercial space in short order.”</p>
<p>Vivint does some very limited commercial business right now, primarily for its residential customers who own small businesses.</p>
<p>The previous credit facility wouldn’t allow for real expansion into the commercial market, he said. “If we’d had a credit facility that was flexible enough, we would have tens of thousands of commercial customers right now.”</p>
<p>The company will enter the commercial space in a methodical way, he said. Will the company also venture into systems integration? Pedersen said yes, but it will “do one before the other.”</p>
<p>“I look at the building next door and I think they should have solar panels, access control, security cameras [and] lighting controls, and we should be providing all of it to them,” he said.</p>
<p>What about acquisitions? “You never say never, but we are great at creating the customer,” he said.</p>
<p>Pedersen praised Goldman Sachs, Jupiter Partners and Peterson Partners and said he’s happy that the deal with Blackstone will “give them an opportunity to exit with a huge multiple,” noting that “we were not a $1.9 billion company in 2006 when they invested. Their return on capital has been outstanding.”</p>
<p>Pedersen estimated that in 2006, Vivint, then APX Alarm, was a $100 million company.</p>
<p>Citibank and Bank of America/Merrill Lynch advised Vivint on the deal.</p>
<p>The companies included in the deal are Vivint, Vivint Solar and 2GiG, a provider of home security and automation systems. Pedersen said that other than being an investor in 2GIG and asking the company to provide certain products, he’s been hands-off, leaving Todd Santiago (2GIG president) and his team alone to run their business.</p>
<p>Pedersen said nothing would change with Blackstone as the owner of 2GIG. “Blackstone isn’t in the business of building and engineering technology,” he said.</p>
<p>Security Systems News asked Todd Santiago to clarify the relationship between Vivint and 2GIG now and after the sale to Blackstone. "2GIG was not and is not owned by Vivint. That misconception stems from the fact that we have similar investors that include Goldman, Jupiter and Todd Pedersen. It is important to note that 100 percent of 2GIG's shares are being purchased as part of this transaction. Current management will stay in place and the plan is to aggressively grow our business both domestically and internationally. We are very excited about the future and are committed to building on our track record of bringing industry-changing products to market. We are grateful for the support of hundreds of dealers that depend on our products and we are confident that we will continue to exceed their expectations." </p>
<p>Pedersen predicted Blackstone will also let Vivint Solar be autonomous. He also believes Vivint Solar “will have the largest residential solar customer base in 18 months in the U.S."</p>
<p>“Vivint with more access to capital, and cheaper capital, is a stronger Vivint,” Pedersen said.</p>
<p>He said the company would be "thoughtful around R&amp;D spending and adding additional service layers onto the platform. We’re going to stay ahead of the game.”</p>
<p>This deal comes amid a flurry of M&amp;A activity in the security space. Pedersen called that activity and this deal “a vote of confidence around a space that was not recognized or paid attention to a few years back.” He said he has “a lot of respect for a lot of Vivint competitors who run great companies. I think there’s a lot of upside for all, but we’re going to compete hard.”</p>
<p>Pedersen said the company’s growth plans are “aggressive but attainable.” Asked if Vivint would double in size in the next five years, Pedersen said, "If we only double our enterprise value in the next five years, I hope they fire me."</p> </div>
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<span property="dc:title" content="Vivint to be sold to Blackstone in $2 billion deal" class="rdf-meta element-hidden"></span>Wed, 19 Sep 2012 01:22:53 +0000SSN Editor15677 at http://securitysystemsnews.comhttp://securitysystemsnews.com/article/vivint-be-sold-blackstone-2-billion-deal#comments